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Mt Gibson latest iron shipper

Jim Hawtin investigates the pressures driving the iron ore industry and the companies looking to profit from it.

 

ON Monday at Geraldton’s recently upgraded port, 40,000 tonnes of high-grade iron ore aboard a bulk carrier will set sail for China.

The load belongs to WA’s newest iron ore miner, Mt Gibson Iron and is that company’s first shipment of ore.

Like Mt Gibson, which floated in 2001, producers and new players around WA are scrambling to get in on the global boom that is powered by China’s appetite for iron ore and steel.

Responding to the strong growth in world iron ore demand ABARE forecasts Australian exports to rise by 13 per cent to 205 million tonnes in 2003-04 – valued close to $6 billion.

AME Mineral Economics says China’s infrastructure and manufacturing expansion will catapult Asian steel output to almost match the rest of the world’s entire production within five years.

Two years ago China consumed 116 million tonnes of steel, making it the world’s largest steel consumer.

University of WA economic research forecasts suggest steel consumption in China will rise from 116 million tonnes in 2000 to around 182 million tonnes in 2010.

BHP Billiton, which is understood to have commissioned UWA to conduct a further study into China’s steel demand, is more confident.

The global resource house says China’s iron ore demand rose from 113 million tonnes per annum last year to about 150 MTPA in 2003.

It expects Chinese demand to grow to between 185 million tonnes per annum over the next four to five years.

BHPB’s latest series of announcements signals its confidence.

Last week BHP Billiton CEO Chip Goodyear told journalists in Perth the global miner had plans to incrementally expand its Pilbara iron ore operations to about 145 million tonnes a year by the end of 2007.

He said the plans would help to maintain BHPB’s market share amid the booming demand.

BHPB has already said it planned to be producing 110 million tonnes per annum (MTPA) by the end of 2004 and a was undertaking a study into further increasing production, up to 150 MPTA.

The company has also just spent $US351 million on an upgrade and expansion of port and rail facilities in Port Hedland to handle 100 million tonnes per annum.

Burgeoning demand from China was also behind rival iron ore producer Rio Tinto’s recent dramatic expansion plans in the Pilbara.

Hamersley Iron, owned by Rio Tinto, will spend $US920 million expanding its iron producing capacity while Robe River (53 per cent Rio Tinto) will increase their output by 25 per cent, agreeing to spend $135 million on its West Angelas mine.

It is understood Rio Tinto is targeting a combined output of 200 million tonnes by 2008.

Rio Tinto’s desire to keep market share was also signalled by its announcement to more closely align the two Pilbara iron ore businesses.

The Pilbara Rail Company will now manage and coordinate both company’s rail and port facilities with a view to cutting costs and maximising operations.

Further down the exporters list from the two global giants is Perth-based iron ore miner Portman Iron Ore.

Currently Portman exports 5 million tonnes of iron ore from its Koolyanobbing mine each year.

However, last week the company said it had increased its ore reserve estimate at Koolyanobbing by 41.8 million tonnes to 63.8 million tonnes boosted by drilling at the Koolyanobbing, Mt Jackson and Windarling deposits.

The ore reserves were calculated from a total mineral resource of 157.4 million tonnes incorporating all drilling undertaken in late 2003 at those deposits.

The upgraded reserve will suffice a mine life of 13 years at the current production rate of five million tonnes a year.

However, with an aggressive exploration program on the go as well as a scoping study to increase production by 200,000 million tonnes per annum, Portman says it has a future as a growing iron ore producer.

The upgrade also paved the way for a detailed scoping study to increase the production of the Koolyanobbing project above its current level.

Along with Mt Gibson there are other players looking to get in on the boom.

Successful mining promoter Andrew Forrest’s Fortescue Metals Group has plans to mine iron ore and operate an ambitious $1.25 billion rail and port project.

FMG has iron ore projects at Mount Nicholas, Mindy Mindy as well as in the Pilbara.

Last week, FMG, which describes itself as the new force in iron ore, finalised a memorandum of understanding with China’s largest steel maker, Baosteel, on a long-term three million tonnes a year sales deal.

Pilbara Hancock Prospecting, chaired by former iron ore magnate Lang Hancock’s daughter Gina Rinehart and South Africa’s Kumba want to develop a mine at Hope Downs in the Pilbara.

The Hope Downs project recently won a coup when the WA Supreme Court ordered BHPB to share its Pilbara railway.

That could potentially decrease mine start-up costs at Hope Downs by $300 million. 

Another iron ore junior, which is shaping up with some potential, is Aztec Resources.

Aztec has just commenced the first phase of drilling at the Koolan iron ore project, formerly owned by BHPB, off WA’s north west coast.

It hopes to raise its current resource of 25 million tonnes of high-grade iron ore by 67 per cent at Koolan.

The company is now planning a more aggressive exploration program.

Shares in Aztec Resources were up 7.1 percent this week at 15 cents.

 

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